UPDATED, April 23, 5:53 p.m.: Even at a $4.4 billion valuation, Compass is still navigating how to make money off its newer services.
“We’re not yet at a stage where I have a very clear monetization strategy because we haven’t really talked about it,” chief operating officer Maëlle Gavet told the Wall Street Journal. The brokerage, with a $1.2 billion war chest, has lured agents with perks like full commission splits, stock options and massive marketing budgets — but doesn’t yet have a clear plan to turn a profit on a slate of new services.
CEO Robert Reffkin told the Journal the company to make money through ancillary services like title, mortgage and insurance services — but it’s unclear how. Earlier this year, Compass hired Google alum Max Henderson to help guide the effort.
Unlike like other major brokerages in the city, Compass has relied on an influx of venture capital money, namely from SoftBank, to fund its significant spending. Plus, a potential IPO is on the horizon. But to some in the industry, that approach doesn’t make sense.
“Are you a charity or are you a real estate company?” Bess Freedman, CEO of Brown Harris Stevens, told the Journal.
Compass has chased massive growth across the country, putting pressure on competing brokerages to keep up. In 2018, Compass expanded from 37 markets to 122, hired over 1,000 employees and signed on almost 6,000 new agents, Reffkin previously said in a company-wide email. Under its “20/20 by 2020” plan, the brokerage would reach a 20 percent market share in each of the top 20 markets by 2020.
In New York, growth has primarily entailed poaching agents — but earlier this year, Compass struck a deal to acquire Stribling & Associates. Terms of the acquisition weren’t disclosed. Its aggressive strategy hasn’t always sat well with other players in the industry. At a recent panel, Freedman likened the approach to chasing after another man’s wife. And last week, Zillow Group slammed Compass with two lawsuits, alleging the brokerage hired three top technology staffers in violation of their non-competes as it staffed up its new tech hub in Seattle. The lawsuits also claim that Compass actively sought to obtain proprietary information from Zillow to avoid building its own technology.
Compass also launched a commercial division — but nine months in, has only done a handful of deals. The team has grown to include 30 full-time commercial brokers in New York, and will expand further. In addition, the company said it has around 70 brokers nationwide who conduct sporadic commercial transactions.
Reffkin told the Journal that Compass still has a majority of its $1.2 billion in venture-capital money that can be deployed.
“Short term profitability is something that many of the more modern companies are not as focused on,” he told the outlet. [WSJ] — Meenal Vamburkar